Fuel costs push NSW firms to review staffing levels

Rising fuel costs are affecting operations at most surveyed businesses in New South Wales, with the pressure increasingly feeding through to staffing decisions, according to Business NSW.

A survey of more than 630 businesses found 84% said higher fuel costs were already affecting their operations, including 37% that described the impact as significant or severe. The strain is being felt alongside higher freight and supplier costs and weaker consumer spending.

Almost half of respondents, 47%, said they were reviewing staffing levels and working hours. Nearly a third had already reduced staff hours or income, while 35% reported growing employee anxiety about job security.

The data also pointed to changing workplace requests as households absorb higher transport costs. Some 19% of businesses said employees had asked for more work-from-home days to cut fuel expenses.

Regional strain

The impact was stronger in regional areas, where businesses and workers often face higher transport costs and longer travel distances. That is adding to pressure on employers already dealing with narrow margins and weaker demand.

The findings come as insolvency numbers in the state remain elevated. More than 3,600 NSW business insolvencies have been recorded since July, up 21% year on year, according to ASIC figures cited by the business group. NSW has recorded more failures than Victoria and Queensland combined.

Daniel Hunter, chief executive of Business NSW, said the rising costs were increasingly shaping labour decisions.

"The fuel crisis is no longer just a cost issue for business. It's becoming an employment issue. New Business NSW survey data shows how quickly pressure is moving from the balance sheet to staffing decisions, especially in regional NSW. From more than 630 employers across the state, 84 per cent say the conflict is already impacting their operations, 47 per cent are reviewing staffing levels or hours, 29 per cent have already reduced staff hours or income, and 35 per cent report growing uncertainty among staff about job security," Hunter said.

He said employers had limited options as costs rose across several parts of their operations.

"When costs spike this fast, cutting hours or jobs is the last thing employers want to do. But higher fuel, freight and supplier costs leave fewer options to absorb the shock. Small and medium businesses are doing the right thing by their staff, but payroll tax compounds the problem. It is effectively a tax on employing people," Hunter said.

Tax debate

Business NSW is calling for diesel supply certainty, action on price gouging, temporary fuel tax relief and targeted payroll tax relief, particularly for regional businesses. It argues labour costs are becoming harder to sustain as other input costs rise.

Attention is also turning to the structure of payroll tax in New South Wales. According to NSW government figures provided in the material, the state's payroll tax rate is 5.45% and the threshold is £1.2 million.

Business NSW said a regional NSW business with a wage bill of $4 million would save about $110,000 a year if it were based in regional Victoria. It is using the comparison to argue the current settings put some employers in New South Wales at a disadvantage.

Hunter said the group wanted a lower rural and regional payroll tax rate.

"That's why Business NSW is calling for a significant reduction in the rural and regional payroll tax rate to protect jobs and keep labour-intensive businesses operating. At 5.45 per cent, NSW has one of the highest payroll tax rates in the country, with a threshold frozen at $1.2 million despite years of wage growth and inflation. A regional NSW business with $4 million in taxable wages would save around $110,000 if it were operating in regional Victoria," Hunter said.

The business group pointed to earlier relief measures as a model for intervention during a period of rising costs and weak confidence.

"We learned during COVID that early payroll tax relief works. Acting now to ease pressure on employers is far cheaper than dealing with unemployment later. If governments want to protect jobs and regional workforces, the time to act is now," Hunter said.